288 F.

2d 245

SPERRY RAND CORPORATION, Plaintiff-Appellant,

v.
Bernard J. ROTHLEIN et al., Defendants-Appellees.
No. 298, Docket 26783.

United States Court of Appeals Second Circuit.

Argued Feb. 6, 1961.
Decided March 21, 1961.

Francis J. McNamara, Jr., Stamford, Conn. (John S. McGeeney,

Cummings & Lockwood, Stamford, Conn., on the brief), for plaintiffappellant.
Donald F. Keefe, New Haven, Conn., (Gumbart, Corbin, Tyler & Cooper,
New Haven, Conn., on the brief), for defendants-appellees.
Before LUMBARD, Chief Judge, MADDEN, Judge, United States Court
of Claims,1 and WATERMAN, Circuit Judge.
LUMBARD, Chief Judge.

This is an appeal from a temporary injunction granted by the United States

District Court for the District of Connecticut, against the Sperry Rand
Corporation, the plaintiff in the action below, which was brought against eight
individuals formerly employed by the plaintiff for misappropriation of trade
secrets and confidential processes. The order entered by the district court
enjoined the plaintiff from making any use whatsoever, in any proceeding other
than the one pending in the District of Connecticut, of information and
evidence disclosed by the defendants in the course of discovery proceedings in
the pending case.

In its complaint filed on June 26, 1959, Sperry Rand alleged that the individual
defendants had left the employ of the plaintiff on or about May 25, 1959; that
they had then organized the National Semiconductor Corporation; that they
unlawfully took with them, for use by the new corporation, the trade secrets and
confidential processes of the plaintiff developed in the course of the plaintiff's

manufacture of semiconductors; and that they had conspired before their

resignation to commit these acts of misappropriation. Injunctive relief and
$1,000,000 in damages were demanded. In an amendment to the complaint,
filed on August 26, 1959, the plaintiff further alleged that the defendants
conspired to and did maliciously entice members of the plaintiff's technical
staff to leave the employ of the plaintiff and join the employ of the National
Semiconductor Corporation. In an answer filed September 3, 1959, the
defendants denied that they had knowledge of or had used secret processes and
alleged that the semiconductors produced by the plaintiff were similar in design
to those well-known in the trade and freely disclosed to the public. They also
asserted a counterclaim for wrongful discharge.
3

Together with the answer, the defendants filed a seven-page list of

interrogatories under Rule 33 of the Federal Rules of Civil Procedure. The
interrogatories requested the plaintiff to identify the inventions, trade secrets,
and processes allegedly misappropriated and provide further detailed
information regarding the subjects of the complaint. The plaintiff objected to
the interrogatories as burdensome and oppressive. This objection was overruled
by the district judge on September 18, 1959. On the same day, however, the
judge entered an order, pursuant to plaintiff's 'additional objections' to the
interrogatories, directing that the plaintiff not be required to answer any of the
interrogatories but one (requesting identification of the 'inventions'
misappropriated), until 'its own discovery proceedings are completed.' This
order was without prejudice to the defendant to move for a modification for
good cause during the course of discovery proceedings.

In the meantime, depositions of the defendants had been taken on July 8 and 9,
1959, with reference to documents and other materials allegedly taken from the
plaintiff. These depositions were taken pursuant to an ex parte motion filed
together with the complaint under Rule 26(a) of the Federal Rules of Civil
Procedure, 28 U.S.C. and an order of June 29, 1959, signed by the district
judge. Another deposition was taken on August 18, 1959, and further
deposition of the defendants began on September 8, 1959.

On September 3, 1959, the parties filed a stipulation protecting the secrecy of

information divulged during the course of discovery proceedings, and the
stipulation was signed by the district judge on September 8. It included a
provision reading as follows:

'Nothing in this order shall be construed to prevent the introduction of any

competent and relevant evidence by any party in any judicial proceeding
subject to whatever orders the court may make at that time to protect the

parties.'
7

The defendants proceeded to call for the depositions of several Sperry Rand
officers in a notice filed on September 14, 1959, but upon timely objection by
the plaintiff, a motion to stay these depositions until after the plaintiff had
finished its discovery was granted.

When, on November 2, 1959, the plaintiff had a subpoena duces tecum issued
to the National Semiconductor Corporation, which had not been named as a
party to the suit, the defendants moved to have the subpoena quashed and the
depositions of the defendants terminated or limited. Judge Anderson, who had
decided all of the earlier motions including a demand by the defendants for
partial summary judgment which was denied, directed that a master be
appointed to supervise future discovery proceedings in the case. This order was
entered and the master appointed on March 9, 1960, and on April 5 the
documents in the case were ordered to be delivered to the special master. The
master, on May 4, 1960, ruled against the defendants on the motions to quash
the subpoena and to limit the scope of the depositions, and the discovery
proceedings resumed. The plaintiff concluded the taking of depositions on
August 4, 1960, and the defendants then requested that their remaining
interrogatories be answered. The replies to the interrogatories were held
inadequate by the special master, who ordered that supplemental answers be
submitted. These were filed on October 22, 1960. On November 1, 1960, the
court directed the plaintiff to supply, in the form of an amended complaint, a
more definite statement of its claims, and this was filed on November 16. The
defendants then proceeded to take depositions of various of the plaintiff's
officers.

On January 11, 1961, the plaintiff instituted an action in the Superior Court for
Fairfield County, Connecticut, against the National Semiconductor Corporation
and eleven named officers and employees, and demanded temporary and
permanent injunctive relief against the defendants to restrain their use of the
plaintiff's process for manufacture of silicon alloy-junction transistors. The
defendants thereupon moved in the United States District Court, before Judge
Anderson, for a restraining order enjoining the plaintiff from proceeding in the
state court. In an order issued on January 27, 1961, Judge Anderson granted the
relief which is the subject of this appeal.

10

Since the Connecticut court had set January 31, 1961, as the date for return of
the order to show cause why an injunction should not issue, the plaintiff, upon
filing a notice of appeal, requested this court to stay the order of the district
court pending appeal. We denied the application on January 30, 1961. The

motion to the Connecticut court for a temporary injunction was denied on

January 31, when the plaintiff advised the court that the outstanding order
prevented it from introducing evidence in support of the motion.
I.
11

The appellant first challenges the authority of the district court to enter an order
such as the one before us and cites 28 U.S.C. 2283 as authority for its
contention. That statute, enacted in 1948 as an amendment to the former 265 of
the Judicial Code, reads as follows:

12

'A court of the United States may not grant an injunction to stay proceedings in
a State court except as expressly authorized by Act of Congress, or where
necessary in aid of its jurisdiction, or to protect or effectuate its judgments.'

13

The appellant maintains that the order issued by Judge Anderson effectively
stayed proceedings in the state court since it prevented the appellant, who there
sought a temporary injunction, from introducing evidence in support of that
demand.

14

It is clear that the command of 2283, which has its roots in a longestablished
policy dating back to the Judiciary Act of 1793, may not be avoided by
addressing the injunction to a party instead of to the state court, e.g., Furnish v.
Board of Medical Examiners, 9 Cir., 257 F.2d 520, certiorari denied 1958, 358
U.S. 882, 79 S.Ct. 123, 3 L.Ed.2d 111, or by enjoining just one necessary step
in the state-court proceedings, see Hill v. Martin, 1935, 296 U.S. 393, 403, 56
S.Ct. 278, 80 L.Ed. 293. The history of 2283 and its predecessors reveals a firm
Congressional policy against interference by federal courts in state judicial
proceedings. This policy has been strictly invoked by the Supreme Court in
those cases in which it had occasion to pass on questions relating to the
construction of 2283 and its predecessors. See Hart & Wechsler, The Federal
Courts and The Federal System 1057-58, 1073-78 (1953); Note, 74
Harv.L.Rev. 726 (1961). The approach taken in Toucey v. New York Life
Insurance Co., 1941, 314 U.S. 118, 62 S.Ct. 139, 86 L.Ed. 100, which
circumscribed the powers of the federal courts to interfere in state-court
proceedings to several narrowly defined areas, has survived the 1948
amendment of the statute, 62 Stat. 968. In Amalgamated Clothing Workers of
America v. Richman Bros., 1955, 348 U.S. 511, 515-516, 75 S.Ct. 452, 455, 99
L.Ed. 600, Mr. Justice Frankfurter, speaking for a majority of the Court, said of
2283:

15

'This is not a statute conveying a broad general policy for appropriate ad hoc
application. Legislative policy is here expressed in a clear-cut prohibition
qualified only by specifically defined exceptions.'

16

Although the order in this case did, in effect, prevent the appellant from
proceeding in the Connecticut state court, we hold that it was not in violation of
28 U.S.C. 2283 for two reasons:

17

First, we hold that Judge Anderson's order did not 'stay proceedings in a state
court' within the meaning and purpose of 2283. By prohibiting the use of
material divulged during discovery proceedings in the federal court, the district
judge was putting the plaintiff-appellant where it would have been had it gone
immediately to a state court and not first instituted an action in the federal
court. No avenue available to it in the state courts was closed by the order; only
use of the fruits of the federal court discovery was denied.

18

In carrying out the principle of comity announced by Congress in 28 U.S.C.

2283, the federal courts must, of course, look not to the form which a requested
order takes but to its actual impact. In this case it is not the fact that the order is
addressed in terms to the introduction of evidence alone that persuades us that it
is not the kind of injunction forbidden by 2283. Rather, it is because the order
does no more than deprive the plaintiff-appellant of the benefits of federal court
discovery, which the district judge believed would be used inequitably, and
because it leaves access to state processes otherwise unrestricted, that the
injunction falls beyond the scope of 2283.

19

We realize that by enjoining any use of or reference to information or materials

first divulged in the course of federal discovery, the district judge was barring
access to this evidence even after resort to such discovery processes as were
available in the state courts. However, the broad proscription was necessary to
carry out the purpose of the order lest it otherwise be frustrated. Having once
learned, during the course of extended discovery proceedings, where the
relevant evidence was located and who could provide testimony regarding it,
the plaintiff-appellant would then have enjoyed a distinct advantage in the state
courts over the defendants, whose turn at federal discovery had not yet come,
even had the plaintiff been required to use the state's discovery procedures
before introducing its evidence. In order equitably to afford both parties a fair
opportunity before the state courts it was necessary to deprive the plaintiff
totally of the advantage it had as a result of the priority granted it in the federal
discovery proceedings.

20

Second, we hold that the injunction entered by Judge Anderson was necessary
to effectuate his earlier order relating to the priority of discovery. Nothing in
the concluding phrase of 2283-- which authorizes injunctions against statecourt proceedings when necessary 'to protect or effectuate' federal-court
judgments-- limits its scope to final judgments. The policies which impelled
Congress to enact 28 U.S.C. 2283 in order to overrule the decision in Toucey v.
New York Life Insurance Co., 1941,314 U.S. 118, 62 S.Ct. 139, 86 L.Ed. 100,
apply to interlocutory as well as to final decrees.

21

In this case the district court decided, after hearing argument from both parties
and considering memoranda at a pre-trial conference, that the plaintiff was to
be permitted to conclude it discovery before the defendants would begin theirs.
This decision was a matter of discretion and was consistent with established
procedure in this circuit. E.g., Sanib Corp. v. United Fruit Co.,
D.C.S.D.N.Y.1955, 19 F.R.D. 9. Had the defendants then sought to undermine
the ruling, which took the form of an order entered on the moving papers, by
immediately instituting discovery proceedings in a state court, the district court
would have been protecting its judgment by enjoining the proceedings in the
state court. Similarly, the portion of the same judgment which calls for
discovery by the defendants after the plaintiff has taken its turn is protected and
effectuated by the order now before us.

22

Implicit in any schedule of discovery proceedings is the assumption that, absent

unusual circumstances, interlocutory relief will not be granted until both parties
have an equal opportunity to learn the facts and present their case to the court.
It was this aspect of the order that the plaintiff was trying to nullify by
proceeding in the state court instead of seeking similar relief in the federal court
action. Enjoining this attempt to avoid the thrust of the federal court decree is
not prohibited by 28 U.S.C. 2283. Cf. Berman v. Denver Tramway Corp., 10
Cir., 1952, 197 F.2d 946; Jacksonville Blow Pipe Co. v. Reconstruction
Finance Corp., 5 Cir., 1957,244 F.2d 394, 400.
II.

23

The appellant also maintains that if Judge Anderson's order was not prohibited
by 28 U.S.C. 2283 neither was it authorized by any statute, rule of procedure, or
principle of law.

24

We hold, however, that under the particular circumstances of this case, the
district court acted well within its equitable discretion in issuing the order
irrespective of authority which may or may not exist under a statute or rule of

procedure. Since, as we have held, the order is not of the type prohibited by 28
U.S.C. 2283, the court could issue an injunction to prevent unnecessary or
vexatious litigation. See Higgins v. California Prune & Apricot Growers, Inc., 2
Cir., 1922, 282 F. 550. Moreover, when, as in this case, the court believes that
suit is being brought elsewhere where to undermine a decision already made by
the court, an injunction is proper. See Helene Curtis Industries, Inc. v. Sales
Affiliates, Inc., 2 Cir., 1957, 247 F.2d 940. We do not now decide whether the
provision in Rule 30(b) of the Federal Rules of Civil Procedure authorizing the
district court which supervises oral depositions to 'make any other order which
justice requires to protect the party or witness from annoyance, embarrassment,
or oppression' extends to orders, such as this one, which regulate the use to
which a party may put information divulged during a deposition.
25

In the present case many factors combine overwhelmingly to justify the order
issue by Judge Anderson. Not only was the state court proceeding contrary to
the purpose of the pretrial order entered by the district court, but the issues to
be presented to the state court were the same as those then pending in the
federal court. The very same relief prayed for in the state court could have been
granted, upon a showing that it was equitably justified, by the United States
District Judge. The appellant's contention that full relief could not have been
provided by the federal court since the National Semiconductor Corporation
culd not have been joined as a party defendant in the federal suit without
destroying the requisite diversity of citizenship is without merit. The
defendants in the federal suit controlled the corporation, so that an injunction
issuing against them would, for all practical purposes, have been as effective as
an order directed to the corporation. Moreover, the defendants agreed to
stipulate in the district court that the terms n the district court that the terms
binding on the National Semiconductor Corporation as well.

26

In summary, this appears to be a case on which the plaintiff sought to use

immediately in a state court the fruits of federal discovery proceedings in which
it had been given a priority. The plaintiff apparently believed that injunctive
relief, though available in a federal court, would not be granted by the district
judge until such time as the defendants had been afforded the opportunity to
conclude their depositions. The district court's order was fully justified as an
exercise of its discretion.

27

Affirmed.

Sitting by designation